Dec 9, 2021 - Politics & Policy

White House shocked by Treasury's IMF promotion

The IMF's world headquarters in seen in Washington.

The International Monetary Fund headquarters in Washington. Photo: Daniel Slim/AFP via Getty Images

The White House was surprised Treasury officials orchestrated the promotion of Gita Gopinath to the International Monetary Fund's No. 2 position without their consent, people familiar with the matter tell Axios.

Why it matters: The communication failure over who should replace Geoffrey Okamoto as first deputy managing director suggests there are different opinions in the administration about how to use U.S. leverage at the Fund.

  • The IMF serves as the world’s economic firefighter, providing billions of dollars in financial support to countries facing fiscal crises.
  • The No. 2 slot helps set policies, resolve differences between departments and oversees the Fund’s most significant and complicated lending programs.
  • "The White House and Treasury are in lockstep on ensuring the Fund can continue its critical and necessary work, especially during the global economic recovery,” a White House official told Axios.

Between the lines: By tradition, the top IMF job goes to a European, with the U.S. getting to pick the second-in-command. That relationship is reversed at the World Bank: the U.S. gets the top pick, Europeans the No. 2 slot.

  • While most of the recent holders of the job have been academic economists, Okamoto, a former Trump official who joined the IMF in early 2020, was not.
  • He'll leave his post in January.
  • Gopinath had been serving as the IMF's chief economist.

The intrigue: The move to replace Okamoto with Gopinath, a tenured Harvard economics professor on leave to serve at the IMF, was spearheaded by David Lipton. He currently serves as counselor to Treasury Secretary Janet Yellen.

  • Lipton himself held the FDMD job until 2019, when the bank’s managing director Kristalina Georgieva, in coordination with the Trump administration, hastened his departure.
  • Lipton, who has an economics PhD from Harvard, wanted to install an economist as FDMD, and made the case for Gopinath.
  • Born in India, Gopinath completed undergraduate and graduate degrees in India and received her PhD from Princeton. She is a U.S. national, as well as an overseas citizen of India.

Go deeper: Over the summer, Georgieva began to discuss with Gopinath the possibility of her leaving her job as the chief economist for the No. 2 job, according to an international official.

  • At the same time, Treasury officials were discussing her as a replacement for Okamoto and exploring how to restore some of the traditional job responsibilities stripped before he took the job.
  • White House officials thought her candidacy had been abandoned when the IMF announced in October she planned to return to Harvard.
  • They were surprised when the IMF announced last Thursday she would become the FDMD.
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